Please note all figures below are as disclosed in the 31 March 2016 Annual Report. Therefore the figures in sterling are using applicate exchange rates relating to the year ended 31 March 2016.

On 1 October 2015, the Group acquired Kuhlmann for a total consideration of €8.5m (£6.2m). The initial amount of €6.8m (£4.9m) was paid on completion in cash and €0.04m (£0.03m) was satisfied by the allotment of 29,350 ordinary shares in the Company. Consideration of €1.7m (1 October 2015: £1.2m, 31 March 2016: £1.3m) was deferred for 12 months with payment made in September 2016. The cash consideration was met from the Group's existing bank facilities.

The Group is investing in Kuhlmann to further develop the opportunities in the German market and the acquisition of Kuhlmann was earnings enhancing in the first full year of ownership.

Based in Verl, close to Bielefeld, Germany, Kuhlmann was founded in 1996 and employs 18 staff. It is a well-respected highly efficient distributor of industrial fastenings within the domestic German market. Its emphasis is on delivering high quality products and services to its well-established longstanding customer base in the principal sectors of machinery and plant engineering, sheet metal processing and industrial. Kuhlmann's management team and previous owners, Frank Niggebrügge, Eric Hütter and Peter Henning, continue to run the business with the support of the operational management team and staff who will remain within the business.

For the year ended 31 December 2014, Kuhlmann reported revenue of €6.7m (£5.4m) and profit before tax of €1.7m (£1.4m). Gross assets at the same date were €1.4m (£1.1m).

In the six months since acquiring Kuhlmann to 31 March 2016, the subsidiary contributed £0.5m to the consolidated underlying operating profit for the year and £2.5m to the Group's revenue. If the acquisition had occurred on 1 April 2015, Group revenue would have increased by an estimated £2.4m and consolidated operating profit would have been increased by an estimated £0.6m. In determining these amounts management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same as if the acquisition had occurred on 1 April 2015.

The acquisition had the following effects on the Group's assets and liabilities.

Provisionalfair value disclosed^ £000

Adjustmentsto provisional fair values£000

Recognisedfair value£000

Property, plant and equipment

176

(2)

174

Intangible assets

3,651

—

3,651

Inventories

463

(6)

457

Trade and other receivables

420

3

423

Cash and cash equivalents

583

—

583

Trade and other payables

(297)

(18)

(315)

Deferred tax liabilities

(1,011)

1,011

—

Net identifiable assets and liabilities

3,985

988

4,973

Consideration paid:

Initial cash price paid

4,897

—

4,897

Equity instruments issued

31

—

31

Deferred consideration at fair value

1,232

—

1,232

Total consideration

6,160

—

6,160

Goodwill on acquisition

2,175

(988)

1,187

^ These amounts were disclosed in the Half Yearly Financial Report for the six months ended 30 September 2015.

The fair value of trade receivables is £0.4m. The gross contractual cash flows to be collected are £0.4m. The best estimate at acquisition date of the contractual cash flows not to be collected is £nil.

The values previously disclosed in the Half Yearly Financial Report were provisional and were given for information purposes only since the acquisition was completed so close to 30 September 2015. An in-depth analysis has now been completed and led to adjustments to provisional fair values as disclosed in the table above. As part of this analysis it was identified that a tax deduction can be obtained locally for amortisation relating to acquired intangibles. Therefore on acquisition there was no temporary difference between the tax base and accounting net book value of these assets and hence no deferred tax liability was recognised.

Intangible assets that arose on the acquisition include the following:

£3.3m of customer relationships, with an amortisation period deemed to be 10 years

£0.4m of other intangibles, with an amortisation period deemed to be under 1 year

Goodwill is the excess of the purchase price over the fair value of the net assets acquired. Locally a tax deduction is available for Goodwill which is amortised over 15 years. It mostly represents potential synergies, e.g. cross-selling opportunities between Kuhlmann and the Group, and Kuhlmann’s assembled workforce.

Effect of acquisition

The Group incurred costs of £0.26m in relation to the acquisition of Kuhlmann which have been included in administrative expenses in the Group’s consolidated statement of comprehensive income and form part of separately disclosed items, see note 2. The foreign exchange losses of £0.55m made on the €1.7m deferred consideration and €6.8m external loan are part of the Group’s net investment hedging and therefore have been recognised in the exchange reserve.